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ESG and customer stability: a perspective based on external and internal supervision and reputation mechanisms

Author

Listed:
  • Hong Xu

    (Shandong Normal University)

  • Yukun Li

    (Shandong Normal University)

  • Weifen Lin

    (South China Agricultural University)

  • Hui Wang

    (Hunan University)

Abstract

According to external pressure theory and reputation theory, reputation-oriented enterprises will experience external pressure as societal attention increases, and enhanced ESG performance can mitigate information asymmetry and boost reputation, thereby signaling to customers the company’s commitment to sustainable development. Based on the data of A-share listed firms in China, this paper manually compiles the detailed information of corporate customers, and explores the relationship between firm’s ESG performance and customer stability using a two-way fixed-effects model. The results show that: (1) Firms with ESG advantages can enhance customer stability, and the higher the ESG score, the more significant the improvement in customer stability; (2) The mechanism test indicates that firms’ ESG performance improves customer stability by strengthening internal and external regulation as well as enhancing corporate reputation; (3) The heterogeneity analysis indicates that in high governance level and small-sized firms, the effect of firms’ ESG performance on customer stability is more significant, and in the ESG sub-test, environmental and social responsibility have a more significant impact on customer stability. This paper provides implications for improving firms’ social responsibility and stabilizing the supply chain.

Suggested Citation

  • Hong Xu & Yukun Li & Weifen Lin & Hui Wang, 2024. "ESG and customer stability: a perspective based on external and internal supervision and reputation mechanisms," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-14, December.
    • Handle: RePEc:pal:palcom:v:11:y:2024:i:1:d:10.1057_s41599-024-03490-8
    DOI: 10.1057/s41599-024-03490-8
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    Cited by:

    1. Hua Liu & Juncheng Wang & Mengna Liu, 2024. "Can digital finance curb corporate ESG decoupling? Evidence from Shanghai and Shenzhen A-shares listed companies," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.
    2. Li Meiyi & Gan Yufei, 2025. "More Philanthropy, More Consistency? Examining the Impact of Corporate Charitable Donations on ESG Rating Uncertainty," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 19(1), pages 1-21.

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